Can you benefit from a new relief procedure for 60-day rollover errors?
Tax Tip of the Week
September 12, 2016
Can you benefit from a new relief procedure for 60-day rollover errors?
Requesting forgiveness for an IRA rollover error may now be a bit simpler and less expensive, thanks to a recently-issued IRS procedure. If you inadvertently missed the 60-day time limit for making IRA or retirement plan rollovers, you may be able to notify your account trustee, and avoid taxes and possible penalties. Here's what you need to know.
- The rule. When you take a distribution from your IRA with the intention of rolling it over into another IRA or retirement plan, you're required to complete the rollover within 60 days of receiving the distribution. Missing the deadline means the distribution can be considered income to you, and you may have to pay a penalty as well.
- What's changed. The 60-day rule is still in effect. In the past, when you missed the deadline, you generally had to request relief from the IRS. That meant paying a fee and going through a process to obtain a written statement waiving the rule. Now, the IRS says that in some cases you can "self-certify" by submitting a written letter to your financial institution or trustee explaining why you missed the 60-day deadline. Your error must be one of eleven allowable reasons, such as death or serious illness in your family, severe damage to your principal residence, or misplacing and never cashing the distribution check.
While the new procedure provides welcome relief, keep in mind that you have safer options for moving your retirement funds between accounts, including a trustee-to-trustee transfer.
Please contact us before you take withdrawals from your IRA or other retirement accounts. We can help you stay within the rules and avoid negative tax consequences.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
© MC 2016
September 12, 2016
Can you benefit from a new relief procedure for 60-day rollover errors?
Requesting forgiveness for an IRA rollover error may now be a bit simpler and less expensive, thanks to a recently-issued IRS procedure. If you inadvertently missed the 60-day time limit for making IRA or retirement plan rollovers, you may be able to notify your account trustee, and avoid taxes and possible penalties. Here's what you need to know.
- The rule. When you take a distribution from your IRA with the intention of rolling it over into another IRA or retirement plan, you're required to complete the rollover within 60 days of receiving the distribution. Missing the deadline means the distribution can be considered income to you, and you may have to pay a penalty as well.
- What's changed. The 60-day rule is still in effect. In the past, when you missed the deadline, you generally had to request relief from the IRS. That meant paying a fee and going through a process to obtain a written statement waiving the rule. Now, the IRS says that in some cases you can "self-certify" by submitting a written letter to your financial institution or trustee explaining why you missed the 60-day deadline. Your error must be one of eleven allowable reasons, such as death or serious illness in your family, severe damage to your principal residence, or misplacing and never cashing the distribution check.
While the new procedure provides welcome relief, keep in mind that you have safer options for moving your retirement funds between accounts, including a trustee-to-trustee transfer.
Please contact us before you take withdrawals from your IRA or other retirement accounts. We can help you stay within the rules and avoid negative tax consequences.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
